An investment agreement between the Centre and states to take place which will ensure that big-capex FDI projects get fair treatment and do not get caught in red tape and disputes.
The Centre-state investment agreement is a tool to commit states to creating a good business environment. The initiative is being seen as a follow-up measure to India signing a number of Bilateral Investment Treaties (BITs).
"The central government is selling India globally. However, investment happens in states. Therefore it is incumbent upon the states to deliver," an official said.
Signing such a treaty will not be obligatory for a state, and all states, irrespective of the party in power in a state. However all the states will be equally encouraged to sign such a treaty, officials said.
There are 73 such treaties, mostly modeled on the 2003 Bilateral Investment Protection Agreements (BIPAs). The current government is replacing BIPAs with BITs. These treaties are aimed at giving fair treatment to major foreign investors.
Officials said the draft of the policy proposes that states sign an agreement with the Centre that commits a foreign investor project will get non-discriminatory treatment. Through that it will be protected against expropriation.
Discussions with state governments have also started. Officials pointed out that states that sign such treaties with the Centre may appear to be more attractive destinations for foreign investors.